CORONAVIRUS (COVID-19) IMPACT ON VARIOUS INDUSTRIES & POTENTIAL PATHS OF RECOVERY

Introduction: The COVID-19 pandemic is going to be the longest health crisis ever being suffered in the modern times. The pandemic has disrupted global supply chains and international trade. More than 100 countries are closing their national borders and the movement of people has come to a screeching halt. The pause in the movement of people is greatly affecting the world economy, as people are staying indoors and major industrial productions has come to a grounding halt. According to an analysis by the UN Department of Economic and Social affairs, the global economy could shrink by upto 1% in 2020 due to the coronavirus pandemic which is lower than the previous forecast of 2.5% growth. The UN also added that the global economy could contract even further if restrictions on economic activities are extended without any adequate fiscal responses.

The coronavirus pandemic is affecting the overall growth of global economy. Some industries are booming in the event of crisis such as Technology, Entertainment industry. Entertainment industry with strong digital presence like Netflix, Amazon prime and technology companies aiding the operations of workplace like videocalling app Zoom are growing significantly in this crisis. Sectors like Groceries, Sanitary & cleaning, Food and beverages, Wholesaling are set to increase due to the pandemic. The corona virus scare has created a huge awareness on hand washing and there is a growing consumers’ inclination towards disinfectants and sanitary products. While some industries are growing with new opportunities, some are stalled and reeling under the lockdown. Tourism and travel industry are completely out of business due to social distancing and travel restrictions. Almost 100 countries over the world have closed their borders and airports have been shut-down for passengers. The airline companies, tourism related business are losing revenue due to the COVID-19 pandemic. Manufacturing sectors are also being closed and the productions are paused due to workers being quarantined in their homes. The agriculture sector is experiencing shortage of labor and fall in agricultural commodity prices. Banking and financial institution will be having hard time in collecting their dues and will be renegotiating credit terms. Banks also won’t be able to gain new deposits during this crisis and thereby affecting its earnings.

Positively and Negatively Affected Industries by Coronavirus (COVID-19)

POTENTIAL RECOVERY PATHS FROM COVID-19 PANDEMIC

The COVID-19 pandemic and the global economic crisis could recover in the potential paths such as U, V or L shaped curve. The V shaped curve represents the return of the GDP to the earlier pre-crisis level after a dip in the growth rate. The U-shaped path is when the actual growth rate falls and recovers to the pre-crisis level, but the GDP remains below the previous trend. The L-shaped path is when the growth rate declines and remains below the earlier level for a prolonged period. The GDP falls substantially below the pre-crisis trend and stays there.

Three Potential Paths to Recovery from Coronavirus (COVID-19)

What the economy is facing now is completely different from what happened in 2008 recession. The problem in 2008 was a banking crisis as there was too much bad debt but what the economy facing now in 2020 is severe disruption in economic activity as we are stalling operations of everything from manufacturing to services. Though it is unlikely the present recession to go into depression as the economic inactivity is likely to persist only for a short time and may resume after the corona virus is contained and are in controllable levels. How long the economic inactivity persists, and other indicators like distress in credit market, inflation rate and bankruptcies will determine the recovery of the global economy.

According to Market Research Universe, the potential path to recovery is expected to be u-shaped curve with 60% probability. As the economy is experiencing both demand and supply shock, the growth rate is expected to recover slowly post the pandemic period. The growth rate will recover alongside with the demand as the relaxation on lockdown measures is likely to create demand. When lockdown is relaxed, people will start working on their unfinished business. For example, scheduled business meetings, planned vacation trips and social events are more likely to resume after the crisis. But these will not happen quickly after the lockdown are lifted as businesses need time to regenerate sufficient cash flows and revenue to go ahead in making important decisions. Therefore, the growth potential is expected to remain lower than the pre-crisis level as there will be significant business failures, unemployment and losses during the pandemic. The return to earlier growth trend poses challenges as the operations of business are expected to drastically change in the coming years. Many companies may go bankrupt and the management’s operations will be distracted by focusing on securing employment. New business expansion plans will be postponed. Time to rebuild the credit facilities, re-establishing client or consumer relationships and rehiring employees after layoffs is expected to delay the growth pace. Moreover, even if the lockdowns are lifted social distancing, limits on travelling is likely to continue. It is unlikely that almost all restaurants, hotels can operate at half capacity. For instance, South Korea is a great example in observing the recovery path, as the country still imposing restrictions in social gatherings and schools being postponed. These restrictions are therefore likely to slow down the growth rate from recovering. 

IMPACT OF CORONA VIRUS (COVID-19) ON VARIOUS INDUSTRIES

·      Healthcare: COVID-19 Impact on Health Care Industry

The health Care industry is experiencing surge in demand for medical supplies due to the pandemic. The demand for essential medical supplies like Masks, protective clothing, hand sanitizers, ventilators are expected to grow enormously. As major countries have expanded their production capacity, the market for medical supplies is expected to grow. According to MARGMA, the demand for medical gloves is expected to jump from 298 billion pieces in 2019 to 345 billion pieces in 2020.

Testing kits for COVID-19 is on huge demand after the virus started to spread rapidly across the world. According to Market Research Universe, COVID-19 Testing Kits market is expected to grow with a rapid pace over the forecast period. Medical device producers have expanded their production levels of corona virus kit to meet the increasing demand. The market for Hydroxychloroquine is also expected to expand significantly in the coming years as the drug is believed to cure Corona Virus. As per the study, the Hydroxychloroquine is expected to grow over 30% in the next few years.

The telehealth service segment is expected to benefit from the ongoing pandemic as hospitals are treating corona virus affected patients as their priority. Other sick patients may switch to telehealth service as they will avoid going to hospitals during the lockdown.

Various governments across the world are encouraging healthcare apps to aid the general public in assessing their risk during the pandemic. In India, the government with the public private partnership built an app called AarogyaSetu which will help public in identifying the risk of getting affected by the Corona Virus.

According to the market study by Market Research Universe, investments in orphan drugs are expected to grow due to the pandemic. Global orphan drugs market is expected to grow during the next few years. The present healthcare crisis is expected to change the investment trend in healthcare particularly in R&D activities in communicable diseases. Moreover, in the light of present health crisis, the World Medical Association has stressed the importance of producing medical supplies in the home country as the global market is dependent on limited manufacturers.

Therefore the overall health care industry is expected to grow at a CAGR of 16% in the coming years as the present health crisis due to pandemic is expected to restructure the health care sector. 

·      Information and Technology

The impact of Corona virus in Information and Technology sector is minimal. Adoption of technology has become significant in this time of crisis. Business integrated with digital technology has better chance of survival. For instance, restaurants with online delivery service are faring well during the lockdown. As people are restricted to gather in large numbers, ordering food online has increased. Moreover, people are getting used to buying groceries online. Major online food delivery companies like Ubereats, Zomato and Swiggy are delivering groceries during the COVID-19 crisis. According to Ubereats, the company’s sales went up about 350% compared with pre-pandemic levels. The e-commerce companies are expanding their reach to towns and cities in delivering essential items and groceries as consumption trends are shifting more towards online. According to the analysis of Market Research Universe, the percentage of online grocery shopping grew from 12% in August 2019 to 33% in March 2020. 

As lockdown is being imposed in many countries to contain the spread of the virus, remote working is becoming more common among businesses. Many firms which were reluctant to implement work from home are vigorously implementing these policies due to the lockdown. Work from home has positively impacted the Information and Technology sector as companies are increasingly adopting cloud based softwares. 

The demand for the cloud based softwares such as Microsoft Teams, Google’s GSuite , Skype for Business are increasing. The revenue flows for the IT companies are expected to grow around 18% in the medium term due to increasing adoption of cloud based software.

 The techno giants Apple and Google are also launching applications to help identify infection risks during the pandemic. The two companies announced a system for tracking the spread of corona virus using data through Bluetooth Low Energy (BLE) transmissions and approved apps from health organizations. The pandemic has made business units to realize the importance of IT expenditure. But however, theIT spending is expected to buffer and decrease by 2% in the present year 2020 due to the crisis.

The overall Information and Technology Industry is expected to grow over 7% CAGR in the coming years. As there will be more businesses entering into the digital world, the market is expected to grow later in the year.

To know more about the COVID-19 impact on various industries including

-Utility (Renewable Energy)

-Finance & Insurance

-Mining

Oil & Gas

-Retail

-Aviation

-Automotive

-Real Estate, Rental and Leasing

-Agriculture

-Tourism

& the CONCLUSION: THE POST CORONAVIRUS (COVID-19) WORLD

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